from the head-buried-firmly-in-the-sand dept

For years the traditional cable and broadcast industry has gone to great lengths to deny that cord cutting (getting rid of traditional cable TV) is real. First, we were told repeatedly that the phenomenon wasn't happening at all. Next, the industry acknowledged that sure -- a handful of people were ditching cable, but it didn't matter because the people doing so were losers living in their mom's basement. Then, we were told that cord cutting was real, but was only a minor phenomenon that would go away once Millennials started procreating.

Of course none of these talking points were true, but they helped cement a common belief among older cable and broadcast executives that the transformative shift to streaming video could be easily solved by doubling down on bad ideas. More price increases, more advertisements stuffed into each minute, more hubris, and more denial. Blindness to justify the milking of a dying cash cow instead of adapting.

But given the numbers we've seen over the last year or two, even the cable and broadcast industry has had to scale back its "head firmly in the sand" approach to market evolution. Last month MoffettNathanson analyst Craig Moffett, the telecom industry's top media quote machine, pointed out that 2016's 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record. Kagan agreed, a recent report indicating that Pay TV providers lost around 1.9 million subscribers last year, the firm predicting a notable spike in the number of broadband-only homes:

"At the same time, American broadband-only homes grew much faster in 2016 — increasing by more than 2 million. Kagan estimated the U.S. had 15.4 million non-multichannel broadband homes at the end of last year, up from 13.3 million end of 2015. That suggest that 13% of the country’s occupied households make the decision not to take a traditional multichannel TV package."

"US TV subscriber losses and cord cutter/never household
additions saw a major increase in 2016 as compared to 2015: We estimate 2016 saw a decline of 2.05 million US TV subscribers, 2015 saw a decline of 1.16 million, and forecast a decline of 2.11 million TV subscribers for 2017...As of YE2016 we estimate 27.2 million US households (22.3% of HHs) did not have a traditional TV subscription with a Cable, Satellite, or Telco TV access provider, up from 24.2 million (20% of HHs) YE2015, and we forecast 30.3 million (24.6% of HHs) YE2017. 2015 saw 2.1 million, 2016 3 million, and we forecast 3.1 million 2017 cord cutter/never household additions.

The shorter version: by next year, one quarter of Americans will no longer subscribe to traditional cable. And that's only going to accelerate as cheaper, better, streaming alternatives emerge.

In a functioning, healthy market, these companies would see the writing on the wall and adapt, benefiting users. And to be fair, some have tried (Dish's Sling TV, AT&T's DirecTV Now). But with the cable industry's growing monopoly over broadband, a return to rubber-stamp regulation, and the looming death of net neutrality, many of these companies correctly understand they won't have to seriously compete anytime soon. They can simply impose unnecessary usage caps and overage fees on uncompetitive broadband markets, then use zero rating to give their own services a leg up -- while penalizing competitors.

Unfortunately for them, even that likely won't "solve" the tectonic evolution that's only just starting to take place. Ultimately, denial-prone cable and broadcast executives will be left with just one, unthinkable option: actually competing on cable TV price, flexibility and quality.

from the the-future-is-coming-fast dept

We're back again with another in our weekly reading list posts of books we think our community will find interesting and thought provoking. Once again, buying the book via the Amazon links in this story also helps support Techdirt.

Kevin Kelly, whose bio always notes that he "helped launch Wired Magazine," is one of those people who always makes you think. I enjoy his writing and insights into technology more than just about anyone else. So it's exciting to see his new book out, entitled The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future. This isn't a book about making specific predictions about this or that technology, but rather an attempt to look at specific larger trends that Kelly believes are "inevitable." From there, you can start to think about what it would mean for technology, life, work and much, much more.

For anyone interested in the things we talk about here: the intersection of technology, economics, business and policy, I'd put this one on the must read list. Sometimes when you're deep in the weeds of various technologies, it's difficult to separate out specific implementations (successful or not) from the larger overall trends. But, in the long run, it's the trends that are most important. You may not agree with all of Kelly's thoughts on what trends are inevitable, but they will (inevitably!) force you to think about where we're going. As always, Kelly is very, very optimistic about these things, which is something I generally agree with, but even if you're pessimistic about the future, I still think this is a worthwhile book (in fact, I can't wait until one of the prominent "tech skeptics" tries to dismantle each of the inevitable trends in this book, as I'm sure that will be a fun read as well).

from the a-brand-new-world dept

Normally, reading a report on an earnings forecast by a video game company is no more interesting than it would be if the company made, say, toilet bowl brushes. But every so often, you can catch a glimpse of where a company thinks the gaming industry is going and how gaming might evolve next. One such report on Activision's earnings has some interesting tidbits to go along with the company's acknowledgement of the known trends in digital distribution.

The report starts off with Activision reporting that its overall sales strategy is focused on shifting as much effort to digital/internet sales as possible. This is no surprise of course, as the trend for gaming to shift away from shiny discs and towards downloads has been in place for a while now. Still, hearing Activision report that three-fourths of its revenue now comes from sales over the internet is jarring. But the really interesting stuff comes when Activision talks about how the internet has made it possible for a gaming company to go beyond making "games" and instead creating living, evolving game worlds for players to immerse themselves in.

Activision also said two of its newest games -- the space-age shooting game Destiny, and the digital card game Hearthstone: Heroes of Warcraft -- have accumulated more than 50 million registered users and are now responsible for more than $1 billion sales. Hearthstone, for tablets and smartphones, is offered for free to download, and makes its money by charging for upgrades and additional items over time. Destiny is also designed to get players spending money over the next ten years of its development by offering additional storylines and other items. Activision says Destiny's player base clocks around 3 hours of playtime a day.

The 11-year old World of Warcraft game is one of Activision's best known and longest-running active games. That has helped executives see the value in creating titles of all types that operate less as products burned onto physical discs and played over a short time to living titles, regularly expanded and updated over time. So far, it's paying off. Activision said a record 76 percent, or $538 million, of its total revenue came from sales over the Internet of full-game downloads and in-game adds-ons.

MMOs are not new. As the quote above notes, WoW is over a decade old. That said, gamemakers might have waited until recently to decide that evolving, online gaming worlds are going to be the new norm in gaming. The way Activision is talking about this sounds like the idea of making "games" is going to take a backseat to making evolving, always-running, decades-spanning game worlds in which the sales strategy will be an ongoing participation by gamers, rather than simply having them plunk down $40 at a retailer to take their shiny disk home and pop it into a console.

Activision isn't alone in this line of thinking.

This shift, though more dramatic with Activision, follows an industry trend with other large game makers, like Electronic Arts and Take-Two Interactive, which have both seen consistent boosts to sales over the Internet in recent quarters. These companies are beginning to see success in the games industry as less a matter of selling the most units and more a question of how to get gamers to play a single game for longer -- and spending real money in the virtual worlds as well.

Ten years ago, the method for measuring the play time in gaming was measured in hours. Ten hours was a short game, twenty was about average, and a forty-hour game was massive. Now game developers are looking to measure game time in years, not hours. It's a massive shift in business models.

This isn't to say that the more traditional "game" is immediately going away, of course. Activision is still going to pump out Call of Duty games, and is even reportedly looking to revive the Guitar Hero brand. But this sort of reminds me of how it felt at the start of the adventure game decline fifteen or so years back. They didn't die off immediately, or at all, really. Instead, the industry just slowly stopped making as many of them, bit by bit, until the point-and-click adventure game became the niche market it is today. Will old-fashioned "games" follow the same trajectory? The money trend seems to indicate it might.

from the the-point-is-way-over-yonder dept

There's been a lot of discussion lately about how far the US has fallen behind other countries when it comes to high speed broadband. And many are taking it for granted that high speed broadband is important to economic growth and viability. Yet Tim Worstall, over at Forbes, argues that "High Speed Broadband Doesn't Matter A Darn" because a UK study showed that people don't use super high speeds. He quotes a report (pdf) from Booz & Co.

But speed in itself is not enough to encourage usage. Ofcom (an independent regulatory authority for U.K.
communications industries) has noted that in 2011 superfast coverage of the U.K. was at 60 percent, but only 6.6
percent of all connections were taking advantage of the top speeds. This suggests that focusing on availability is
no guarantee of deriving full benefit from the investment.

Worstall then uses this to argue that speed isn't an issue and we shouldn't invest in faster broadband:

As should be obvious, it’s not the speed of the internet that produces the economic growth. It’s the people using the internet that does. And if only 6.6% of the traffic is using the speeds we already have then there really isn’t much of a case for throwing billions at making it all faster. So that, presumably, only 6.6% of the traffic will use that higher speed.

In fact, given the low numbers even bothering to use current speeds I’d say this is a very good argument for not spending a lot of money to roll out high speed broadband everywhere. The most important reason quite possibly being that I rather doubt that broadband is going to be the technology of choice for much longer.

This reasoning is faulty on many, many levels. First off, if you look at the full Booz report, almost every conclusion is exactly the opposite of what Worstall suggests. He seems to take that one paragraph out of context, and assume that because only a small percentage of people were taking advantage of "top speeds" it means that there's no real demand for it and no economic benefit.

That's making a big assumption. He's right that "it's not the speed of the internet that produces the economic growth," and that it's the people, but he ignores that part of what brings in those people are the services online -- and new, better and more useful services are quite frequently enabled by higher speeds. It's almost hard to imagine how much more can be done online as speeds pick up. A decade ago, the idea of so much video online was crazy. And yet, here we are.

Second, the fact that only a small percentage of people are using full broadband capabilities is meaningless. That's a snapshot, not a look at the trend. What happens is that as more services offer up useful features that increase the number of things you can do with broadband, more people will use it. The last thing you want to do is get caught waiting -- and then suddenly have all your users pissed off that the broadband can't handle the latest and greatest applications and use cases.

Faster broadband doesn't immediately get soaked up, but it does lead to greater investment in bandwidth-intensive services, and that will increase usage and expand the economy. Taking one quote out of context and then looking at a snapshot rather than a trend is not a particularly compelling reason to pull out on key infrastructure investment at a time when it's needed most.

from the and-then-they-look-silly-for-it-later dept

People are notoriously bad at recognizing important trends in innovation. It's most commonly seen in people dismissing some new technology or service as being unimportant. Over and over again, people seem to think that the world is static and thus, people "won't need" certain technologies in the future. There are statements like Ken Olsen's from DEC claiming that "there is no reason anyone would want a computer in their home" (which he has since claimed was taken out of context) or Charlie Chaplin claiming: "The cinema is little more than a fad. It's canned drama. What audiences really want to see is flesh and blood on the stage." Those are both from this excellent list of failed technology predictions -- including a bank telling Henry Ford that "the horse is here to stay" and that the car is just "a novelty -- a fad," and multiple people arguing that there is no need for the telephone, including the head of the British Post Office, noting (helpfully) "we have plenty of messenger boys." Oh, and "Television won't be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night." That's from someone who worked as a movie producer for Fox.

There are many more at that link, and I imagine in a few decades or so, the prediction from TechCrunch that "there is no reason for any individual to have a 3D printer in their home" would fit nicely among those other ones. There's just something about new and disruptive technologies that causes otherwise intelligent people to completely dismiss them. I still chuckle at people who thought that cameraphones were just a fad because their initial quality wasn't that good.

Technology advances and gets better and better. And a disruptive technology's best trick is that it does something completely new that you couldn't have done before. And that's the part that seems to trip people up. You don't need 3D printing in your home now, the thinking goes, so it'll never be worth having in your home. Entrepreneur Mark Birch has a really good response to the TechCrunch claim, noting that a lot of people completely miss disruptive trends when they start:

It is easy to miss the disruptive trend when it is first happening. Because it is often the nerds that are leading the charge, no one pays it any mind. There certainly is some initial hype, but it usually fades quickly because there is nothing for the mainstream to latch onto. They need to see and touch something and thus it is hard for non-geeks to make the mental leap in how the novel technology could be important for their everyday lives. People are looking for applicability when that does not exist in the early days.

The reality of 3D printing is that it is not for everyone right now. In fact, only the most hardcore techie could really get into it and fork over the $1000 for the setup. Very few people can fathom why one would want a 3D printing in his or her home. But people said the same thing when the first dot matrix printers came on the market. They were clunky and slow and expensive and broke down all the time. Plus, who would want to print stuff at home anyway other than computer nerds? Now practically every home has a color printer capable of producing high-quality photos, greeting cards, spreadsheets, novels, and the kid’s homework.

There are plenty of things to be skeptical about, but never underestimate what the geeks are working on. When you get past the hype cycles of “next big thing” and look deeper, you find that all that tinkering and experimenting is leading to something that is pretty remarkable and world changing. It might be hard to see at first, but with a little imagination and time, those early experiments generally lead to entire new industries and to the next generation of great companies.

I'd take it even further. I'd say that if people aren't missing the trend, then it's not disruptive. What makes disruptive innovation so disruptive is often the very fact that so many people dismiss it and insist that nothing will come of it. It's that dismissiveness that often helps the innovation become so powerful, because it gets better and better while people are so busy writing it off. And then, suddenly, it's ready and the world wants it. And the incumbent players, who dismissed it, all feel taken by surprise.

It's easy to miss disruptive trends when they arrive -- but the long term impact of doing so can be quite disastrous for those about to be disrupted.

from the too-legit-to-quit dept

When the VCR first came on the market, nearly 100% of the TV and movie content it was used for was "unauthorized," because the big studios refused to offer films. Of course, thankfully, the Supreme Court eventually made it clear that just because it was "unauthorized," it didn't mean that taping TV for later watching was "infringing." But, if the metric you used to judge whether or not a new technology is a "pirate technology" is what percentage of its use was "unauthorized," you get a very skewed picture. Early on, all sorts of new and innovative technologies are mostly used for unauthorized copies... until the industry catches up. However, people don't often deal with trends very well, and they assume, quite incorrectly, that if a technology is initially used in an unauthorized manner, it must be a "piracy tool" and no amount of discussing how trends and adaptation works will convince them otherwise. Lately, there has been plenty of talk about BitTorrent -- with a few cases here and there pointing out that a high percentage (usually over 90% of works are infringing). The argument being made is that there is little redeeming value with BitTorrent since it's almost exclusively used for infringement.

Of course, over time, things change. Content creators begin to embrace the new, realize that it might not be evil, and suddenly we see more and more interesting case studies. And that seems to be happening with BitTorrent. The recent MusicMetric analysis of BitTorrent downloads for the first six months of 2012 found that 31% of downloads were for authorized files. Now, you can argue that this is still less than half of all files -- but it's a big step up from the standard claims that somewhere between 1% and 10% were authorized. It seems quite likely that the trend is moving in the right direction.

In an effort to highlight just how much authorized content is shared using BitTorrent, Bittorrent Inc. put together a neat graphic representation of just one day's authorized downloads, creating a massive page that includes a single dot for every authorized download. We've put a snapshot of just a small portion of that image below this post... but that's really only a fragment. If you go to the full page, there's an awful lot of scrolling involved. And that's because it's showing 689,955 authorized downloads. In a single day. Not bad.

In case you're wondering who's actually offering up music that's getting downloaded like this, Eliot van Buskirk tracked down the top ten authorized music acts on BitTorrent, which turns up a few surprises.

Death Grips: 34,151,432

Counting Crows: 26,950,427

Billy Van: 18,702,053

Gods Robot: 12,172,672

Way Too Sick: 9,974,321

Paz: 6,485,001

Bray: 5,878,492

Pretty Lights: 5,005,061

DJ Shadow: 4,349,048

Chester French: 523,356

As Eliot notes, that number one legal download, Death Grips, is signed to a major label deal on Epic (part of Sony Music). The Counting Crows are obviously a big name as well, and we wrote about their decision to use BitTorrent. They're ex-big label, but now independent. Also, DJ Shadow and Chester French were both associated with Universal sub-labels, though I do not know if either are still "signed." Either way, it's interesting to see that it's a mix of artists, including some from major labels and some others. It certainly looks like, perhaps, the idea that BitTorrent is just for infringement may have to be officially considered debunked.

from the urls-we-dig-up dept

Some companies spend a lot of effort tweaking their logo and making sure their brand image stays shiny and new. But how much does it really matter? There are some truly iconic corporate logos, but it's really the businesses behind the logos that create the image of the company. Not the other way around. Or maybe a nice reliable-looking logo really does inspire a company and its employees to bleed purple or something....

This is exactly the point I was trying to make a couple months ago, in pointing out the impossibility of stopping truly distributed systems through conventional means (whether the distributed systems are doing good or bad things), and how little the people in power recognize this.

Yet the debate over WikiLeaks has proceeded as if the matter might conclude with the eradication of these kinds of data dumps--as if this is a temporary glitch in the system that can be fixed; as if this is a nuisance that can be made to go away with the application of sufficient government gusto. But I don't think the matter can end this way. Just as technology has made it easier for governments and corporations to snoop ever more invasively into the private lives of individuals, it has also made it easier for individuals, working alone or together, to root through and make off with the secret files of governments and corporations. WikiLeaks is simply an early manifestation of what I predict will be a more-or-less permanent feature of contemporary life, and a more-or-less permanent constraint on strategies of secret-keeping.

This is about dealing with reality, but so many of those in charge are working from the wrong playbook -- the one that doesn't realize that this is the new reality.

The basic question is not whether we think Julian Assange is a terrorist or a hero. The basic question certainly is not whether we think exposing the chatter of the diplomatic corps helps or hinders their efforts, and whether this is a good or bad thing. To continue to focus on these questions is to miss the forest for the texture of the bark on a single elm. If we take the inevitability of future large leaks for granted, then I think the debate must eventually centre on the things that will determine the supply of leakers and leaks. Some of us wish to encourage in individuals the sense of justice which would embolden them to challenge the institutions that control our fate by bringing their secrets to light. Some of us wish to encourage in individuals ever greater fealty and submission to corporations and the state in order to protect the privileges and prerogatives of the powerful, lest their erosion threaten what David Brooks calls "the fragile community"--our current, comfortable dispensation.

Again, this is why I have pointed out the similarities between the whole Wikileaks situation and the entertainment industry's response to file sharing. In the latter, it was never about whether or not file sharing was good or bad, moral or immoral, or even (really) whether or not it helps or hinders the creative lives of certain individuals or companies. What happened with file sharing was an inevitability, and the focus from the beginning should have been about figuring out "what do we do now, knowing this reality."

For years, I've said that one of the reasons I focused so much on the music industry was that I hoped other arenas that faced similar questions would learn from the mistakes of that one industry. And, yet, we see time and time again that this almost never happens. We've seen the movie industry, the software industry, the video game industry, the publishing industry and more follow the same path making the same mistakes. And now we're seeing the US government do it too -- and this is a case where the stakes may be much, much bigger.

from the the-self-delusion-of-the-damned dept

There's a NY Times article that appears to have a bunch of cable & TV companies congratulating themselves for beating the internet in getting people to keep paying high monthly premiums to get premium TV channels on their TV, rather than using some of the various internet solutions out there. Like so many awful NY Times "trend" pieces these days, it appears to key off of a single anecdote of one guy who tried to ditch cable, and then went back after a year. How many people are actually doing this? No idea. It's not like the reporters at the NY Times tell us. They do tell us that not too many people have dropped cable, but that's hardly surprising. What's much more amusing is the suggestion that the cable and TV companies have somehow "beat" the internet by restricting content:

In part that is because the television business took action to avoid the same fate. Heavyweight distributors and producers have protected their business models by ensuring that some must-see shows and live sporting events cannot legally be seen online.

Legally. Yes. But, just wait until you see what that enables on the less-than-legal side of the internet. As for the fact that people aren't dropping cable yet, this all really sounds like the cable companies not recognizing how trends accelerate. They do, indeed, start slow, and as Clayton Christensen has noted for years, the incumbents don't pay attention early on, because the other solutions just don't seem as good. And... here in the NY Times article we get:

Technology companies are pushing alternatives like Web-connected set-top boxes. But these are still not as easy as signing up for cable or satellite service, particularly for those who want to watch on a big flat-screen TV and not a computer.

Classic innovator's dilemma statement. It's certainly true that, right now, it's not as easy to use these internet services as it is to sign up for cable, but it's getting easier all the time, and sooner or later, someone is going to create a breakthrough service that makes it really easy. We've seen it time and time again. Napster did it for music file sharing after we were told that people didn't want music online. Vonage did it for VoIP after telcos insisted that VoIP quality would never sell. Who knows who it will be, or when, but someone will figure it out, and then we'll see the cable and TV companies freak out, because the cable cutters will shift into high gear.

This is the problem we were discussing recently, where disrupted companies simply don't recognize the speed at which a disruptive offering catches on when it does finally catch on. They think that they're successfully "protecting" their existing business with things like Hulu's subscription plans, but that will cause them to miss the truly disruptive innovation.

At least the NY Times article hints at the growing undercurrent, in noting that the younger generation is four times as likely to go without a cable subscription. That number is just going to grow, and as new offerings come along that make it easier and easier to get what you want, when you want it, without silly restrictions, the idea that the legacy guys "beat" the internet by restricting access to content will seem laughable.

Update: And look... just as this is published, out comes the news that cable TV has suffered its first ever decline in subscribers. Nice work, NY Times, in pitching a whole story based on a single anecdote, about how cable has nothing to fear... just as the numbers come out to show that people are, in fact, cutting back on cable subscriptions. I'm sure stories like this will make the upcoming NY Times paywall that much more valuable.

from the this-won't-save-your-business dept

Back in 2003/2004, both the music and the mobile industries became infatuated with ringtones. These short snippets of music were selling for 2.5 times (or more) what a single (full) music file was selling for, and the market was growing rapidly. Of course, some of this was due to incredibly shady practices, such as tricking people into thinking they were buying a single ringtone, when they were really signing up for a monthly subscription. However, from the very beginning of the ringtone revolution, we were amazed at how many folks in the industry talked about ringtones as a savior. As we pointed out in 2004, it wasn't hard to predict that ringtone sales would peak and fall. First of all, it would become increasingly easy to take music that people had from elsewhere (authorized or not) and convert it to a ringtone, and secondly, it wouldn't be all that long until unauthorized ringtones became easy to set up as well.

But the industry has a way of overhyping a fad that's happening "now," and betting it will be its savior.

And, of course, exactly what was predicted way back when is now coming true. The ringtone market has been on the decline for a few years now, as people realized they didn't need to pay exorbitant prices for a tiny snippet of music anymore.

This is why we should think carefully whenever we hear people claiming that "app stores" are the new saviors of various content industries (or, for that matter, the mobile industry). While app stores are a bit more defensible than pure ringtones, it's likely to still face the same basic trajectory, as people realize that apps are just data, and there are increasing opportunities for more open solutions to route around locked-down versions. People seem to think there's some sort of magic in "apps," but they're really just the same sort of digital content that has been hard, economically, to monetize long term. There are ways to do it, but simply assuming that apps alone will be the answer is likely to end in disappointment.